Crude oil prices dipped recently due to ongoing uncertainty in Venezuela following the overthrow of President Nicolás Maduro. U.S. crude fell by 31 cents to $57.01 per barrel, while the global benchmark, Brent, dropped 22 cents to $60.53.
Donald Trump has signaled that the U.S. aims to invest heavily in Venezuela’s oil sector as part of its response to this political upheaval. In a press conference, he mentioned that major U.S. oil companies would be involved in repairing Venezuela’s ailing oil infrastructure. However, he reaffirmed that the U.S. embargo on Venezuelan oil will stay in place for now.
Venezuela boasts the world’s largest proven oil reserves, standing at 303 billion barrels, which is around 17% of the global total. Once producing 3.5 million barrels per day in the late 1990s, output has dramatically fallen to approximately 800,000 barrels daily, as reported by energy consulting firm Kpler. Currently, Chevron is the only major U.S. oil company operating there, exporting about 140,000 barrels per day.
The immediate impact of Maduro’s overthrow on oil prices remains unclear. Daan Struyven, from Goldman Sachs, noted that while production might eventually increase with a supportive U.S. government, there may also be short-term supply disruptions. He explained that long-term investment could eventually lower oil prices, but the recovery of production will be slow.
Helima Croft from RBC Capital Markets echoed these sentiments, suggesting that turning production back to previous levels could cost around $10 billion per year. She added that the right security environment is vital for this recovery. If there’s a smooth transition of power, we could see several hundred thousand barrels returning to production within a year. Yet, in a chaotic collapse like those seen in Libya or Iraq, the outcome could be very different.
Overall, the situation in Venezuela highlights how intertwined politics and oil are on the world stage. Investors and analysts alike will be watching closely as developments unfold.
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